Cost of Energy in Algeria

According to IMF Country Report, Algerian domestic prices of hydrocarbon products are very low by both regional and global standards. As part of a policy to share the country’s natural resource wealth, the Algerian government has kept the prices of hydrocarbon products at levels below international market prices. This policy of implicit subsidies has resulted in some of the lowest prices for hydrocarbon products in the world. Gasoline prices in Algeria are below the MENA average and much lower than the prices found in Europe and the United States. The price of diesel fuel is lower than the subsidized prices found in other oil-exporting countries such as Bahrain, Kuwait, and the United Arab Emirates. Algerian natural gas, which fuels 98 percent of power and water generation, is the cheapest in the region after Libya. Retail prices have been frozen since 2005 and are now below operational costs.

Electricity prices are also very low, but getting access to electricity is costly. Almost all of Algeria’s electricity generation comes from natural gas. Like natural gas prices, electricity prices have been frozen since 2005 and are much lower than in most other emerging and advanced economies for which data are available. Low tariffs, however, mask other costs. Obtaining an electricity connection is time-consuming and expensive, involving five procedures that take 180 days and cost the equivalent of 1,563 percent of per capita GDP. Taking these factors together, Doing Business ranked Algeria 148th in terms of the ease of getting electricity.

Moreover, Sonelgaz, the public utility company, has seen its debt rescheduled on multiple occasions by the government as a consequence of supplying services at below-market prices.